Foreign Exchange Daily Market Update 29/06/11

The Pound slipped further against the Euro yesterday, not the news that consumers who are buying Euros were looking for. The GBP/EUR rate dropped from 1.1163 at the morning’s open, to trade at 1.1142 by the end of the day. There was better news for people buying Dollars though, as the rate picked up from 1.5982, to break back through the 1.60 barrier, with the GBP/USD exchange rate closing the day at 1.6018. The Pound was not helped by the final reading of 1st quarter UK GDP, which although showed no change in the quarterly growth rate of 0.5%, the annual figure was revised downwards from 1.8% to 1.6%. This is a real blow for economic growth prospects in the UK, and the foreign exchange market showed its negative response to this news with the rates dropping as the figures were released.

Today’s economic docket from the UK has seen mortgage approvals show a slight monthly increase, up from 45,400 to 45,900; a positive increase, but falling below the market expectations for a reading closer to 46,300. There are no other figures of real economic note set for release from the UK, but one major piece of news from Europe could well have a big effect on any movements in the currency exchange market.

Following a day of gains against both the Pound and the US Dollar, the Euro will be open to the possibility of sharp movements today. As well as the release of Euro-zone consumer confidence figures, the market will be focusing on the outcome of a vote in the Greek Parliament on austerity measures. For any solutions to be implemented and the IMF to give Greece access to extra funding, this austerity measure bill will need to be passed in Parliament. The market could see a sharp reaction if there is any fallout, and the minute possibility that the bill will not be passed.

The US Dollar did weaken slightly against the Euro and the Pound across the course of yesterday; and the currency was not helped by a poor market reaction to US consumer confidence figures. With the market forecasting only a small drop, from 61.7 to 61.0, the actual figure reported a huge drop down to 58.5. This shows that positive sentiment from the US consumer has fallen significantly, and could be an early indication of a slowdown in personal income and consumer spending, which would translate to an overall slowdown in economic growth.

Today’s US economic docket will see the release of pending home sales figures, and the market will be looking to see if there is any positive support from the housing sector. With the labour market weakening, and also consumer expectations lowering, the currency will need to see some positive sings from this sector if there are to be any gains.